Unnatural disasters: Auto crisis highlights need to save pensions

The grave situation facing the auto industry is bringing into sharp focus the sorry state in which the Bush regime left our nation’s entire retiree security structure. A recent New York Times piece () spotlights this issue, but also highlights the pro-corporate bias that has permeated the “mainstream” media’s coverage of this crisis.

The Times article says that possible bankruptcy of General Motors would “accelerate the decline of traditional pension plans,” which have “been in slow decline.” Further, if GM dumps its pension plan, “then for competitive reasons the others have to do the same thing.” This would result in “fiendishly complex” problems “calculating which workers would bear how much of the losses.”

It is, of course, beyond the thinking process of big business apologists that the millionaires who actually created this economic disaster be required to “sacrifice,” instead of those who spent their lives working for them in grueling, dangerous toil.

What nobody in the “mainstream” media is addressing is the unbelievably horrible suffering that corporate bankruptcy anytime, but especially in this time of economic depression, would mean, not only to the autoworkers and their families, but also to the industrial communities around those plants.

On this question, we need not speculate. We have a working model in the steel communities decimated by shutdowns and corporate bankruptcies during the 1980s and continuing today. Once-thriving communities like Youngstown, Lorain and Canton, Ohio; South Chicago; and Homestead and Pittsburgh, Pa., suffered what can only be called unnatural disasters. As a participant in this game of corporate monopoly, I witnessed, and was struck by, this corporate tsunami.

In Lorain and Canton alone, five workers took their own lives when Republic Steel went into bankruptcy, and workers’ pensions and health care were stolen. Epidemics of mental health problems, divorces, waves of drug use and crime, school systems collapsing, block upon block of abandoned, boarded up homes and pervasive hopelessness, anger and despair swept over these communities. And this was during times of so-called economic upsurge.

While we’ve heard corporate spokesmen speak of banks’ need to be bailed out, because they are “too big to fail,” none among them seems able to apply a similar standard to the potential massive blow that would be dealt to our already suffering economy by a loss of pensions, health care and general economic well being for 485,000 GM pensioners. The corporate flaks trumpet the notion that contracts are sacred, unless, of course they are of the union variety.

What bankruptcy really means

If GM is allowed to go into corporate bankruptcy, under the present system, the GM/United Auto Workers pension plan would be taken over by the Pension Benefit Guarantee Corporation (PBGC), a government agency set up, under pressure from organized labor, in 1974 as part of the Employee Retirement Income Security Act.

PBGC/ERISA was created by Congress after Studebaker went under and those workers lost their pensions and benefits, and had nothing to fall back on. The agency’s job is to seize, then administer, the pension plan of a bankrupt company, distributing pension funds, based on an actuarial plan, to retirees. It did its job admirably from its inception until the Bush years.

However, the PBGC does not administer health care and other benefits that are part of the UAW contract. In the event of a GM bankruptcy, hundreds of thousands of UAW retirees could stand to lose their health care benefits. In any economy, that would be a massive economic blow to these workers, their families and the entire community. n today’s battered economy, it is literally a matter of life and death.

In addition, under PBGC rules, many additional benefits negotiated by the UAW to protect workers, encourage workers to retire early or enhance retirement are discarded. What makes this so unfair to workers, so infuriating, is that in many cases, including the Republic case, is that the companies came to the union, hat in hand, asking for concessions in order to improve their situation, and the union was able to negotiate these benefits in return for the concessions. Under existing bankruptcy law, this is not taken into consideration and the companies get off free!

Who’s to blame for ‘unfunded benefits’?

Here again, the corporate media are misleading. Journalists too often unthinkingly repeat the term “unfunded legacy benefits,” in many cases when referring to union-negotiated pensions.

The great majority of existing pension plans are nowhere near fully funded. But that is only the case because PBGC rules requiring pensions to be fully funded were altered during the Reagan administration, allowing as little as 15 percent funding, in some cases, to be considered “fully funded.” Unions can only negotiate the benefits — the companies are required to fund them. It was, of course, the companies who lobbied that pro-corporate Reagan administration to “relax the PBGC rules.”

Bankruptcy law puts workers at the bottom

Furthermore, existing bankruptcy law is completely one-sided, in favor of the corporations.

Under current law, companies are able to use bankruptcy to wipe out the existing union contract, citing an “unfair burden” on the company. Bankruptcy court then will set up a payment plan that requires the company to pay its debtors. However, even where the company is stopped short of discarding the union contract and the union has claims against the company for unpaid wages, benefits, etc., the order of repayment in U.S. corporate bankruptcy court places worker/union claims at the bottom. Workers will almost never see any compensation.

Under Bush, agency turns from worker friend to pension thief

If all of the above were not nightmare enough, the few agencies meant to help workers were too much for the Bush regime — FEMA, NLRB and other sectors of the federal government that in any small way aided regular working folks. Bush turned the PBGC into an agency that, rather than insuring workers’ pensions, literally stole them.

The Republic (RTI/REP) case was only one of many, but was a precedent. The Steelworkers union was able to negotiate contractual points that guaranteed immediate pensions to workers that had 70 “points” when their age and seniority were added together at the time of a bankruptcy. However, the Bush PBGC appointee in that case, Steven Kandarian, made up a new date that the PBGC recognized as the official date of bankruptcy, for the sole purpose of denying pensions to workers who’d earned them. Workers are, to this day, being denied benefits and having to pay back “debts” to the PBGC under that outright theft. Use of the PBGC to help companies dump pensions and deny workers benefits was rampant during the Bush years.

Another problem that has recently come to light is that under Bush PBGC appointee C.C. Merrill, a large portion of the pension agency funds were taken from relatively safe federal bond investments and gambled on the stock market, resulting in huge losses. While it appears that the PBGC is still solvent, unions and retiree groups are demanding that the monies lost be replaced.

Real solutions

It is the so-called trickle-down “solutions” over the previous years of right-wing rule that have been the cause of today’s economic depression. Union-busting by corporations, aided by the federal government, has pushed the level of union organization to less than 12 percent of the non-public workforce. Real, defined-benefit, pension plans have been decimated from over 120,000 plans in 1980 to under 17,000 such plans still in existence last year. Real wages, adjusted for inflation, are at 1972 levels today.

Our economy, with working people doing all the work and all the “sacrificing,” has reached the breaking point where people can no longer buy what is produced, with massive economic crisis as the result.

With new, more positive majorities in Congress and the new Obama administration, organized labor, retiree organizations and allies must demand new solutions that actually solve problems and help, rather than hurt, working families. In truth, an Obama administration, based on the votes and support of working people, cannot politically survive a federal rape of auto communities.

Demands for change that can really meet the needs of the auto crisis include, but aren’t limited to:

* The PBGC must be fully funded. Monies lost by stock market gambles must be fully replaced and enough federal funds put into the PBGC to meet any upcoming crisis. The USW retiree organization, SOAR, is launching a public campaign on this issue.

* Bush-era attacks on workers, unions and pensions must be reversed. Money taken from pensioners due to these outright thefts must be returned.

* Health care for all, with a fully funded federal program, must be passed now, on an emergency basis. Our society cannot allow autoworkers and their families to lose health care protection. This blow would drag the entire economy into disaster.

* Pass the ‘Protect Employees & Retirees in Business Bankruptcy Act’ — S 2092 in the previous Congress, sponsored by Democrats Dick Durbin (Ill.) and Sherrod Brown (Ohio) in the Senate and John Conyers (Mich.) and Betty Sutton (Ohio) in the House. It would bar companies from ending union contracts and would boost workers’ claims against companies to the highest level in bankruptcy.

* A call must go out for a fully funded real federal portable pension plan for all Americans. This is the only real long-term solution.

These gains are winnable, but only with a fight! It calls for a massive mobilization of organized labor and its allies. Progressives and union activists must do all possible to help bring this about. Resolutions by your local union, district council or central labor body can call for mobilization. Retiree organizations, community groups and churches can be encouraged to join in. We need to make this crisis the one that jars things loose. Future generations are depending on us!

Bruce Bostick is a retired steelworker and union activist.